A common attorney response to this question is often “it depends”. For many reasons, attorneys cannot readily answer a question without further research and even after exhaustive research has been performed, a definitive response still may not be possible. That said, the question to who wins between a debtor and a judgment creditor if the judgment creditor has obtained a judgment against the debtor and subsequently records the judgment with the county recorder thereby creating a judgment lien is a definitively answered question….Debtor Wins!
Pursuant to Arizona Revised Statute §33-1103(B), “Except as provided in section 33-1103, a recorded judgment shall not become a lien on any homestead property. Any person entitled to a homestead on real property as provided by law holds the homestead property free and
clear of the judgment lien.”
The application of A.R.S. §33-1103(B) is clearly outlined in In re Rand, 400 B.R. 749 (Bankr.Ariz., 2008). In re Rand held that Arizona’s protections of the debtors’ homestead prevent the creditor’s recorded judgment from attaching as a lien to the debtors’ homestead property, even if the value of the property exceeds the cap on the value of the exemption. It further went on to explain that a debtor cannot avoid a lien that neither exists nor impairs the homestead exemption.
Therefore, if a debtor is trying to refinance his/her home (which in most cases will be his/her homestead) subsequent to filing bankruptcy in Arizona and the title company states that there is a judgment lien clouding the title and title company believes it cannot refinance due to the judgment lien, it may helpful to switch to a title company that is familiar with the above laws or kindly refer your title company agent to the above state and federal laws. Under these laws, there is no judgment lien and therefore a debtor’s homestead cannot be impaired and title company should continue with refinancing the loan.
There are other remedies to address judgment liens during the course of and subsequent to your bankruptcy proceeding. Whitney G. Coats is a knowledgeable and trusted bankruptcy attorney in Scottsdale who can assist with your legal issues whether they arise prior to, during or subsequent to your bankruptcy proceeding. You want to make sure you properly address matters so they don’t continue to arise in the future, like a possible judgment lien that was recorded against your homestead, unbeknownst to you.
Article By: Whitney G. Coats, Esq.
Whitney G. Coats, Of Counsel, is a bankruptcy attorney who works with the Dana Law Firm in its Consumer Bankruptcy Department.